Wall Street is on the rise after five days of losses, pending the Fed

LAST UPDATE: 18:30

Wall Street indexes are moving higher on Wednesday, for the first time after five falling sessions – which “sank” the S&P 500 in bear market on Monday – with investors waiting for today’s Fed decision on interest rates, “weighing” whether or not the US Federal Reserve will eventually raise its interest rates for almost 30 years.

As time goes on, however, and as the Fed announcement approaches, the indicators are lowering their gains. In particular, the Dow Jones industrial average, which started the session with an increase of almost 400 points, now strengthens by 123 points or 0.41% and moves to 30,487.82 points, the broader S&P 500 from + 1.42% has slowed to + 0.80% and 3,765.47 points, while the technology Nasdaq appears more resilient, recording an increase of 1.51% to 10,991.73 points.

The Federal Reserve is going to announce its decision to raise interest rates at 21:00 (Greek time), followed by the standard press conference of US Federal Reserve Chairman Jerome Powell, with investors hoping to give them a better picture of the next moves of the central bank but also of the course of the American economy.

Bets have risen in recent days that the Fed will raise interest rates by 75 basis points, according to Goldman Sachs and JPMorgan, and not by 50 basis points. previously discounted by the market, a move that, if implemented, would mark the largest rate hike by the central bank since 1994.

Disappointing US inflation data released last Friday, which showed that it continues to gallop to 8.6% year-on-year in May, dashed the hopes of those who thought that price increases had peaked and would follow a de-escalation.

The data triggered an uncontrollable sell-off in stocks and other assets, sending the S&P 500 index into a bear market amid fears that more aggressive action by the Fed would lead the US economy into recession.

“If the Fed makes the surprise move by rising by 50 basis points, the market will certainly recover amid relief. However, the Fed’s primary goal right now is to tame inflation rather than stimulate the stock market. And recessionary conditions. in the market seem necessary to achieve this goal, “said Ipek Ozkardeskaya, senior analyst at Swissquote, in a note to customers.

“Now that the market has swallowed the 75-unit ‘pill’, it would be unreasonable for the Fed not to raise more,” he added.

However, not everyone is convinced that investors will be relieved if the Fed cuts interest rates by half a point.

An increase of 50 basis points, in theory, should cause a rally in shares, “but this is really unclear,” said Chris Weston, head of research at Pepperstone. “The market could reasonably assume that the Fed is further behind the inflation curve and thus boost risk aversion,” he said.

Macro

At the macro level, US retail sales fell for the first time in four months, with vehicle markets plummeting on the broader picture, according to data released today.

In particular, the value of retail sales fell by 0.3%, according to the US Department of Commerce. Excluding vehicles, however, sales rose 0.5% in May. Analysts’ average estimates in a Bloomberg poll spoke of a small increase of 0.1% in retail sales, with a rise of 0.7% without vehicles.

Manufacturing activity in New York improved in June, but remained weak, according to data released today by the New York Fed.

Meanwhile, the Empire State Index for business conditions in the manufacturing sector gained 10.4 points, but remained negative, as in May it had fallen to -11.6%. Specifically, the index stood at -1.2 in June, a measure that indicates a deterioration in business conditions.

Extraordinary ECB meeting

Meanwhile, today, the European Central Bank held an extraordinary meeting to discuss “current market conditions”, after which it announced that it intends to implement a flexible mechanism for reinvesting funds from the PEPP portfolio (the extraordinary program to maintain the functioning of the monetary policy transmission mechanism, which is a prerequisite for the ECB to be able to meet its mission of price stability.

In addition, the Board decided to instruct the relevant Eurosystem committees, together with the ECB’s services, to accelerate the completion of the design of a new anti-fragmentation instrument to be assessed by the Governing Council, in order to address the and the powerful countries of the North.